Transaction taxes are taxes that are not based on profitability but are imposed on a sales or use, exchange or barter of goods or services within a legally defined transaction tax area.
Conventional transaction tax solutions are designed to find sales tax rates based upon a known address or address ranges or at a traditional point of sale. Such addresses often can be provided with zip codes that were designed to deliver United States Postal Service mail.
However, zip codes and postal zones often overlap county and municipal boundaries. This creates inconsistent and unreliable results with regards to tax areas for transaction taxes as certain tax areas can overlap counties within the United States.
For example City ABC may overlap County 1 and County 2. Each county may impose no transaction tax, the same transaction tax or different transaction taxes. Relying on the city (and a zip code) as a location may provide accurate tax rates or inaccurate tax rates.
Known prior art references for transactional taxes include: U.S. Pat. No. 8,725,407 to Hurley; U.S. Pat. No. 8,620,578 to Brown; U.S. Pat. No. 7,783,536 to William et al.; U.S. Pat. No. 7,933,803 to Nadler et al.; U.S. Patent Publication No. 2011/0307359 to Gude et al.; U.S. Patent Publication No. 2011/0191215 to Nadler et al.; U.S. Patent Publication No. 2012/0323749; U.S. Patent Application No. 2013/0013471 to Fishman; U.S. Patent Application No. 2013/0151439 to Galaska.
These prior art systems are dependent on databases that include human readable addresses and use zip codes and postal addresses or address ranges and related interpolated geographic coordinates to set forth tax rates, such as transactional tax rates.
However, these prior art references do not effectively work for businesses that do not have a human readable address and as described below may return erroneous results. A human readable address is defined as a location linked to a dataset of known physical and cultural geographic features, locations, places, or addresses.
For example, an oil or gas well bore does not have a human readable address. A well bore does have a geographic coordinate. Additionally, mobile food vending trucks do not have a fixed address where a transaction is consummated. Furthermore, fair, festivals, markets and shows often do not have a human readable address.
In the United States there are currently five states (Alaska boroughs and cities do impose local sales and use taxes) that do not impose sales, use, gross receipts or other sales transaction tax. Forty-five states impose transaction taxes on the consummation of a sale. Where a sale is consummated is dependent on the State's legal definition of where a sale is consummated.
Twelve states define the consummation of sales where the order is taken. In this case, sales or use tax is imposed at the vendor's location where the order was taken for the sales or delivery of goods or services.
In contrast, thirty-three states define the consummation of a sale where the good or services are delivered.
To find sales tax rates for businesses that do not have a human readable address, a user, such as an account clerk, often spends hours looking up sales tax rates on state tax commission websites based on the state and county. This is a time consuming and arduous task and often inaccurate.
In the case of mobile apps (“mobile software application”), mobile apps and associated goods and services for mobile apps can be purchased when a user is at a place that does not have a human readable address or a place that is different than where the mobile device storing the apps was purchased.
The sourcing of software is dependent on state law. Many states have enacted laws define the sourcing of software is used or first used. Sales are sourced where the software or application is used. Some states source the sales or use tax to the location of the remote server if the software is not actually downloaded. Some states have enacted remote seller laws to capture a use tax on sales that occur within the state boundaries but made by an out-of-state seller. This creates confusion as often sales tax for mobile apps is not apportioned appropriately.
Consequently, there is a need for a system and method that enables a user to capture a geographic coordinate at a point where a transaction is consummated that is not included in a dataset of known physical and cultural geographic features, locations, places, or addresses and calculate the transaction tax based upon legal definitions of transaction tax in that point.
There is a need for a system and method that geospatially locates a place of consummation of a transaction by processing a geographic coordinate rather than by location place name, human readable address or zip code, will return only tax areas that the geographic coordinates are within.
There is a need for a system to calculate sales tax for a non-traditional point of sale.
There is a need for a system and method that allows sellers of mobile software applications to obtain the sales or use tax rates for the location of the mobile device so that sales or use taxes can be collected where the first use of the mobile application occurs.
The present invention intends to improve upon the prior art and to provide a method and system to find sales and use tax rates for businesses that do not have a human readable address.
Moreover, the present invention intends to improve upon the prior art and provide a method and system to calculate a transactional tax for a mobile app whereby the mobile software application is taxed based upon the location of the mobile device or place of first use of the mobile app, rather than where the mobile device was purchased or originates.